Fringe Benefits

7th Schedule
 FRINGE BENEFITS: 7th schedule
• Ito 7th schedule the CASH EQUIVALENT of a TAXABLE BENEFIT is
included in gross income ito para (i).

• TAXABLE BENEFIT – listed para 2 of the 7th sched

• How to calculate the cash equivalents of these benefits described
from para 5 to 13 of the 7th schedule

• Most NB requirement is the employer – employee relationship and

that the benefit is received by virtue of this relationship.

• NB : Benefit granted to relative of an employee or any other person

as result of employee’s employment is taxed in hands of
employee.
 FRINGE BENEFITs: 7th schedule
– This inclusion is i.to para (i) of the special inclusions
of the GI definition.
– Amounts incl. in GI i.to para(i) is excluded from incl.
i.to para (c) of GI.
– Where a benefit is excluded from the 7th schedule
and not incl. i.to para(i) it can still be incl. in GI ito
para (c )
– Where the 7th schedule attaches a nil value to a FB’
it cannot be included in GI i.to para (c ). Because it
has a value its just that the value is NIL
 FRINGE BENEFITS: 7 schedule th

• It is a benefit provided by an EMPLOYER to an

EMPLOYEE.

• Employee taxed on the value of the benefit.

• Value determined independently of the cost to

the employer.

• Value refers to benefits in terms of the Seventh

Schedule.
 FRINGE BENEFITs: 7 scheduleth

• See some rules for application of the 7th

schedule to partners ito para 2A (pg 195 of
SILKE)
Assets acquired for no or at less than actual
value : para 2(a) and 5
Employee gets/ acquires ANY asset (except money)
from employer.
• at less than value of asset.
• Excluded: meals & refreshments , marketable
securities, (s8A) equity instruments (s8B),
qualifying equity instruments s8C)

Cash equivalent = Value – Consideration

 Assets acquired for no or at less than actual value : para 2(a) and 5

Value:
Gen Rule: Market value ( VAT excluded) on date acquired by
employee
Exceptions:
if moveable property ( excl marketable securities and assets
previously held by employer) acquired with intention of
disposing to employee value =
cost (excl VAT) to employer
If its t/stock to employer :
value = lesser of cost or mkt value
(both VAT exclusive)
 Assets acquired for no or at less than actual value : para 2(a) and 5

Bravery and Long service awards –

• reduced by the lesser of cost or R 5000

No/ Nill VALUES:

• Fuel or lubricant used in company car.
• Purchase of immovable property where rem proxy for year
of acquisition is less than R 250K and the market value of
immovable prop does not exceed R450k and employee not
connected to employer.

• Consideration = amount paid by employee (if any)

Examples
Examples
Examples
 Use of sundry assets para 2(b) and para 6

• Employee has right to use any asset either for free or

consideration less than actual value. Taxable Benefit will arise
Value of Private use asset is as follows:
Where: Value of taxable benefit

The asset is leased by the employer,
The asset is owned by the employer,
rental payable by the employer for the
period that the employee has the use of
the asset.
15% per annum × the lesser of the
cost of the asset or the market value
on the date the use was granted.

The sole right of use of the asset is the cost of the asset to the employer
given to the employee, on the date that the right of use was
granted and included in gross
income on that date.
 Use of sundry assets para 2(b) and para 6

NO VALUES – para 6(4) : There will be no taxable benefit if:

(a) the private use is incidental to the use of the asset for the
employer’s business; excluding clothing
(a) the asset is provided as an amenity to be enjoyed by the
employee at his place of work or for recreational purposes
somewhere else provided by the employer.
(b) the asset is any equipment which the employer allows his
employees in general to use from time to time.
(bA) the asset consists of telephone or computer equipment
which the employee uses mainly for the purposes of the
employer’s business.
(c ) the asset is a book, literature, recording or a work of art.
Examples
 Right of use of motor vehicle para 2(b)
and para 7

• Starting point – company car used for private use, and need to
value the benefit so received and all cost borne by employer.

• The value of the private use by an employee of a motor

vehicle allocated to him by the employer is a taxable benefit.

• The private use of the vehicle includes travelling between the

employee’s place of employment and place of residence and
any other travelling done for his or her private or domestic
purposes.
 Right of use of motor vehicle para 2(b)
and para 7

Value :
• Para 7(1) Determined value - RMV (excl finance
charges) as determined by the Minister in the case of an
owned or leased vehicle. ( not operating lease)
Proviso (a)
• Reduced by 15% for every 12 month period between
acquisition by employer and granting right to employee.

• Proviso (b)Reduction not applied if the employee and

vehicle transferred to an associated institution…..see
example 8.9 page 200 silke
 Right of use of motor vehicle para 2(b)
and para 7

Value of private use : para 7(4) =

• Determined value X 3.5% or 3.25% X ( monthly amount)
x months
3.5% used if no maintenance plan.
• Maintenance plan = contract for 3 years or more and a
distance not less than 60 000kms from time of acquisition.
[para 7(11)]

For a vehicle under operating lease : para 7(4) (a)(ii)

Value of private use: rentals plus other cost borne by
employer such as fuel.
 Right of use of motor vehicle para 2(b)
and para 7
• Cash Equivalent = Value of private use – consideration [par
7(2)] monthly basis

• If employee has more than one company vehicle – primarily for

business purposes value for private use of vehicle with highest
Determined Value will be used.[para 7(6)]. Must provide full
detail why 2 cars made available.

• If accurate record kept, para7(7) and para7(8) over ride para 7(6)

• If only used for part of a month, Value of private use apportioned

on a daily basis
 Right of use of motor vehicle para 2(b)
and para 7
• Para 7(7) and Para 7(8) adjustments done at
assessment. (end of year) to give taxable benefit.
• Must keep accurate logbook record of business and
private km’s to get deduction

Para7(7) – reduction of Value of private use by business

kms :
Value of private use x business kms/ total kms
 Right of use of motor vehicle para 2(b)
and para 7
• Para 7(8) – Where the employee bears FULL cost
of the licence, insurance or maintenance – then
part related to private use can be deducted.
Value of private use X private kms/ total kms

• For fuel cost : if full cost for private use is borne

by employee then the reduction is based on:
Private km’s x cost per km from table
 Right of use of motor vehicle para 2(b)
and para 7
• Para 7 (8) A – for a judge or constitutional
court judge the km’s travelled between home
and court that judge presides over is seen as
business km’s
 Right of use of motor vehicle para 2(b)
and para 7

No/Nil values –
• when used by employees in general ( pool
car) and not kept at employee premises.

• If employees duties regulary requires use of

motor vehicle outside of regular work hours
and private use limited to travel between
home and work.
 Right of use of motor vehicle-
para 7(3)(a)
(3) (a) Where an employer’s rights and obligations under a
Lease in respect of a motor vehicle are transferred to his employee
the employer shall for the purposes of this Schedule be deemed to
have granted the employee the right to use such vehicle for the
remainder of the period of the lease.
(b) In such case—
– (i) any rentals becoming payable by the employee under
the lease shall be deemed to be a consideration
payable by him for the said right; and
(ii) the determined value of the vehicle shall be deemed to
be an amount determined in accordance with the
provisions of subparagraph (1) (b);
 Example
• Lease was for 5 years when employer undertook the
lease.
• Lease period left of 2 years when rights transferred to
employee.
• Employee paid Monthly lease payments of R 1 000 for
use of the vehicle to the employer.
• RMV when employer obtained right of use - R 200 000
• Then Value in private use will be
• DV x 3.5/3.25%
• Cash Equivalent :
• Value private use - consideration